'If there were 10 times more IITs or IIMs, there will be opportunity for everyone'


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Is reservation the way ahead for India in its quest for the twin goals of development and social equality? A Harvard alumnus and a founder of Hyderabad's Indian School of Business, McKinsey's ex-MD, Rajat Gupta, shares his views with The Indian Express' Editor-in-Chief, Shekhar Gupta, on NDTV 24X7's Walk The Talk programme.
Rajat, it's a lovely feeling to be here. Thanks for coming. Whoever asks me about the ISB, I say, come to the campus and you’ll get an idea what we are.
Convocation day for the Class of 2006? Yes, it’s our fifth graduating class.
This whole business of multi-crore salaries, and the zeros seem to matter. Is it important or is it hyped? Well, in some ways, this reflects on the quality of the institution, the people it’s attracting and the training given. But at the same time, one of the things we want to make sure—like Ratan (Tata) said today at the convocation—it’s the standards, the values that you play with, not just how the market plays with values.
Right. But what is being valued? Is it Brand ISB or Brand India, to which you have also contributed in some way? I think all of it. Clearly, they recognise it and I would say — I am a student of IIT—going back to the IITs and IIMs, they have contributed to Brand India. ISB will, in time, do the same. And at the same time, all the things that have happened to India at this time have contributed to this. I am so glad there’s a vibrant “can-do-it” attitude.
To that extent, multi-crore salaries do matter? Yes, it helps attract new students. And it’s amazing that the requests for admissions keep going up. I expect next year there will be another record number.
But you know this whole Bharat and India issue— there’s ISB, there are IITs and IIMs, little islands of excellence. How do you reconcile this with the larger reality of India? In fact, that’s the problem our political class seems to have with institutions like these. My view is that in a fundamental way there are no either-or questions. I am very much involved in primary education and primary health in the country. But at the same time, I am involved in higher education. IITs are doing what can be done to take them to the next era, and also ISB. We make a mistake when we talk in either-or dimensions. The country needs all of it. And my biggest regret in some ways is that. Take the IITs. In 50 years, the IITs have barely doubled. For a country that aspires to grow at the pace we want, it’s choking the opportunities for our young people.
And for no reason. For no reason.
I think this is one of the worst kinds of self-denials we are subjecting ourselves to in this country. Absolutely. Everybody talks about the hard infrastructure of the country that needs to improve and so on, but the soft infrastructure needs an equal amount of work. And in the long run, this is far more critical. Health infrastructure, education infrastructure—both at primary and higher level.
How many institutions of the IIT-class does India need? I think, easily, 10 times more.
And pretty much a self-financing business? I think so. I look at ISB. When we started it, everybody said this country can’t afford it. I say, this country can’t afford not to. And within five years we are self-sufficient. The most important thing about ISB is that it needs blind admission. If somebody is qualified, on merit, he/she will get admission, scholarships, other financial aid. They will be able to come to this institution. And in spite of that kind of assistance, we make it a self-sufficient institution.
Have you spoken to policy makers in India on this? I had another of your IIT graduates, Raghuram Rajan of IMF, on the show. He said India needs 50 IITs. I have been talking on this topic for about 10 years. I have spent a lot of time doing work on this at McKinsey, to think how we can scale up. Now I chair the pan-IIT movement, basically saying, how do we scale up? We’ve been saying, give us the mandate to have more IITs and we will go ahead and create them.
Is anybody listening? I think so. I think there are good intentions, but it takes a lot of energy to get anything done here.
And are you greeted with suspicion sometimes, that this is our domain and who the hell are these guys? Maybe, but throughout my life, I have just ignored these suspicions. As long as I am doing it with the right intentions, it’s okay. If they are suspicious, let them be. We started this public health initiative. It initially brought a lot of scepticism. And we said, fine, doesn’t matter and kept at it.
You raised almost Rs 200 crore . Yes. But that’s not the most important thing. What made me achieve that is something very unique. What we achieved is the public-private partnership with the central government, the state government, the NGOs, the poor community, the health community, the international health community, the donor community and the private sector—the business houses —all in a partnership. Sort of stacking hands together, saying this is the problem we need to solve. This is unique.
Tell me, Rajat, during the course of your very interesting and very challenging career, when did this come to your head, that I have to go back and do something in India? It’s very tough to keep fighting your way up the ladder, particularly at McKinsey, which is so competitive. You asked two quite different questions. One is when did I think of getting involved in India. Right from the beginning. I went from IIT to business school to McKinsey and always stayed there.
That’s interesting. IIT to IIM is now a logical path for most people, but when you did this in 1971, it looked like a very new thing, isn’t it? I was admitted to the IIM, but I went to Harvard because I had the best jobs coming out of IIT and had an admission in IIM. About Harvard, it was one of the best business schools in the US and everybody said, there you can’t get any financial aid and can’t get an admission without experience. But it so happened that they not only gave me admission but also gave me full financial aid. I didn’t have any money to go. I remember the job offer I had was at ITC. Haksar was the chairman at the time and I sent him a letter saying I can’t join. He said nobody has turned us down, so you have to come and explain why you can’t join. He sent me an air ticket to come to Calcutta. That was my first flight in my life. I told him, look, either I join you or I can go to Harvard Business School. And he said, go to Harvard Business School, he was a graduate himself.
So, when did you think of finding more time for yourself and investing it mostly on pursuits in India? I wouldn’t say I spent time mostly in pursuits of India. I am very involved in two things, education and health. And there are multiple levels, in private schools in the US and different issues there and I do a lot of work on health.
But it’s an early break from your full-blooded career. I want to make one point. Right from the point when I was three or four years old in McKinsey, I used to come back here and do a lot of different work in my own way that was small at that time. My friend ran adopted villages in Haryana and I would go there and teach. And what struck me when I was the managing director of McKinsey, I said to myself, what can I do on a substantial scale? So I started thinking, and said I know business schools best, because we were the largest recruiters from business schools in the world. So why not start a business school? I actually wanted to do it in IIT Delhi, because I went to IIT Delhi. So I had a lot of discussions at IIT Delhi and it became clear that I couldn’t do what I really wanted within that system.
Howsoever fine the system, there are still bureaucracies and territories? Right. So what happened was that the director then told me, you should do it independently. At that time I was having a dialogue with different people and 12-15 of us came together and formed the founding group. That was about seven-eight years ago.
So, having been a beneficiary of the system, one can understand you think of setting up 50 more IITs, but how do you sell it to the political class? Or to put it more bluntly, (suppose) you’ve got a minute to sell the idea to Arjun Singh and his Leftist admirers or to Murli Man-ohar Joshi and his right wing admirers. No government has been able to solve the problem of poverty. The key issue is to unleash the entrepreneurial spirit, to create business leaders. The government should create an even playing field and then get out of the way. That’s what Japan did, that’s what South Korea did. Every country that has gone from poverty to development has done that. In that context, institutions like ISB are important.
In a place like India, do they bring equality or inequality? According to me, what is important is at what pace you can expand. So, create lots of institutions. The state should concentrate a lot on primary education and primary health. That’s the objective of the state, it must do that. I am not talking about curative health or higher education. It should probably get out of the business of higher education. Lots of people can do that.
Because Mr Arjun Singh says, I am worried right now about equity. So I will slice away 49.5% of the seats for backward classes and deprived sections. Is that the answer? Absolutely not. I don’t believe you can solve it by quotas. I believe in expanding the opportunity, expanding the supply. If there were 10 times more IITs or IIMs, there will be opportunity for everyone.
And it will be definitely worthwhile and justified to invest in that to increase the supply. But Rajat, you’ve seen India now from both sides and I’ve been reading things about you—your father was a journalist in Calcutta, so you don’t come from a business background—when you do that, isn’t there a chance that the same people will make it most of the time? How can that be? I know so many people, with so many different backgrounds. ISB, which is considered a very elitist institution, has a completely blind admission.
But did you think of affirmative action, that certain deprived sections can be given a five or ten per cent advantage? We are trying to balance our class. Just take ISB, we have qualitative measures, quantitative measures, we have interviews, how many women—it’s not a quota, but we are trying to get more qualified women—so in that context, we want balance.
If I take you back to your IIT days, you had classmates then from scheduled castes and tribes. Were they every bit as good as the rest or did you see any difference in their class? At that time there were no quotas.
But now you see graduates coming out, you have been hiring, McKinsey hires, do you ever see a difference? You know, frankly speaking, I don’t even know who’s from a scheduled caste or tribe. I have no idea.
So when people come out of these institutions, they’ve got rid of their “second name?’’ I think so. I couldn’t tell you who is or who isn’t.
What matters is that suffix —IIT or IIM or ISB. No. What they did, what their personal characteristics are and so on.
If you were to advise Mr Arjun Singh now to fix India’s higher education but create access for deprived sections —those that he’s trying to bring in through more reservations—what is your advice? My first advice would be to expand supply. The only way to do this is by opening up the education sector, especially higher education. Set standards, it’s not that we don’t want any regulation—we don’t want people who are fly-by-night or are there for profit. We want institutions that have a certain standard.
Because a lot of shops are coming up, in management, technical education, which are not really up to a scratch. Yes, but the marketplace can sort that out to a large extent. What we don’t want here is profiteering. I would ask the government to concentrate far more on primary education. Not too many people are going into high school education or vocational education after that. Those issues are very important and should be tackled by government encouragement. If I were to think how to develop our manpower, ours is the youngest nation in the world, so we can have more people in our workforce, so it’s so important to train them. The government can help in doing that by opening up, not by controlling.
You think that’s convincing enough for a politician? Because a politician wants votes at the end of the day. I went to the parents of the children living in slums and they said they want great education.
And if you give it to them, they’ll reward you with votes? I think so,
In your dealing with politicians you find—I know the PM is one of a kind, he’s not a career politician. He strayed into politics as you strayed into philanthropy—how do you deal with Chandrababu Naidu here? There are many theories about why he lost—the drought or untimely elections. The way his regime was going, it was very well, doing the right things. I am generally apolitical.
He didn’t have the time to enjoy what he had sowed. There was a Congress minister in my flight today and he said, “Babu set the ball rolling, we hit it.” You can take it in two perspectives. One is that politicians do this to get re-elected, but in the long-term he will be recognised and may come back. And I think you have to do what is right, and eventually it will be recognised.
So, what will you tell Mr Arjun Singh or Mr Murli Manohar Joshi? What will you say about slicing away half the seats—give us the opportunity and we will create 10 times as many seats? Exactly. If we create 10 times as many seats, there will be more than half of those he’s trying to get in and they will be able to get there.
And do you think you will be able to create those? I think so.
What will it need to create five ISBs and five IIT-type institutions in India? Open the education sector to the private sector—you’ll have some standards. You should encourage investment here, just as in industrial enterprises. It’s more important.
And let it generate its own finances. People have been looking at the multi-crore salaries here, but very few people know that the fees here are Rs 13 lakh a year! Mr Narayana Murthy’s been thinking of increasing his fees (at IIM-A), but the increase is from Rs 1.6 lakh to Rs 1.8 lakh. Quality education is expensive. And we need to do more research. The IITs are outstanding institutions because of the intake. We need to invest a lot more in faculty. And if you look at outstanding research institutions around the world, they combine teaching and research. We have to generate more funds. It can happen in the marketplace if you allow it to happen.
The sad thing is that in the very week your’s and IIM graduates have been getting multi-crore salaries, a lot of faculty members have walked away from AIIMS and Dr Venugopal, one of the finest heart surgeons, said: "I can't do anything about great salaries, but what I can do is to tell the government to restructure their salaries in such a way that they have to pay less tax." Obviously, you can’t make all the changes in one swing. I am not saying that suddenly this should become a free market. We’ve got to go through a transition. Let it open for investment. But invest in primary education, that’s what the government needs to do.
After the Indian School of Business, do we see an Indian School of Law, Indian School of Medicine, Indian School of Humanities, Indian School of Finance... because you have to create islands? Yes, but I have to do what I know how to do. I spent all my career in it, so business school is a natural thing for me. I have spent the last 10 years in public health. I know something about it, not a lot, but I’m passionate about it. So the next initiative is the Indian School of Public Health. I want to make that happen. Once you set the initial genes, things take their own shape according to aspirations.

Source : Financial Express